Journal of Accounting and Public Policy
Volume 27, Issue 5, September–October 2008, Pages 357–373
 

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Ole-Kristian Hope (a), , , Tony Kang (b), , Wayne Thomas (c), , Yong Keun Yoo (d),
a Rotman School of Management, University of Toronto, Canada
b Barry Kaye College of Business, Florida Atlantic University, United States
c Michael F. Price College of Business, University of Oklahoma, United States
d Korea University Business School, Korea University, Republic of Korea
http://dx.doi.org/10.1016/j.jaccpubpol.2008.07.003



Abstract

The purpose of this study is to investigate whether firms’ auditor choice relates to national culture. We construct a novel measure of secretiveness based on Hofstede [Hofstede, G., 1980. Culture’s Consequences: International Differences in Work Related Values. Sage Publications, Beverly Hills, CA] cultural factors. Using a very large sample of firms from 37 countries and controlling for a number of firm- and country-level factors, we find that firms in “more secretive” countries are less likely to hire a Big 4 auditor. We also document that the relation between secrecy dimension of national culture and auditor choice is mitigated by the firms’ degree of internationalization. These results establish a link between national culture and financial reporting quality through the firm’s choice of auditor.

Keywords

Culture;
Secrecy;
Auditor quality;
International